• Thomas Parker

Dow drops more than 200 points as U.S. business gauge tumbles

Updated: Feb 28, 2020

The IHS Markit Flash U.S. Composite PMI Output Index, a measure of business activity, fell by 3.7 points to 49.6, the lowest level since October 2013 according to preliminary figures released on Friday. An index figure below 50 indicates a contraction.

The 30-year Treasury yield dipped to a record low and U.S. stocks continued their decline on Friday morning after the first significant data point showed the coronavirus caused U.S. business activity to shrink for the first time since the government shutdown in 2013.

According to IHS Markit economst Chris Williamson, the downturn "was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions."

The decrease in the IHS Markit index was led by service providers, whose reduced new orders marked their first contraction since 2009. Manufacturing PMI fell to a six-month low.

While the slowdown was partially due to the coronavirus, some economists and market analysts are saying that the U.S. service economy is more to blame, and that the virus' toll on the global economy has been more muted than expected.

"Companies also reported increased caution in respect to spending due to worries about a wider economic slowdown and uncertainty ahead of the presidential election later this year," Williamson's statement read.

With consumer spending growth halted in January and now PMI activity contracting, the U.S. economy may be showing signs of reduced overall growth in 2020.

The DOW Jones fell by over 200 points on Friday morning, and the S&P 500 fell fell by over 30 points.

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